Twin City Manufacturing Corporation Is an Accrual Basis Taxpayer

question 73

Multiple Choice

Twin City Manufacturing Corporation is an accrual basis taxpayer. Twin City Manufacturing provides medical insurance for its employees through a self-insured reimbursement plan. Twin City Manufacturing pays $100 per month per employee into the plan fund. The fund is then used to reimburse employees' medical expenses. During the current year, Twin City Manufacturing Corp. pays $12,000 into the fund and pays medical reimbursement claims of $10,600.
I.If Twin City Manufacturing is an accrual basis taxpayer it can deduct $12,000.
II.If Twin City Manufacturing is a cash basis taxpayer it can deduct $10,600.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Institutionalize Changes

The process of embedding new approaches, behaviors, or standards into an organization's culture and practices.

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The process of evaluating and analyzing external and internal surroundings that can influence the performance and strategies of an organization or individual.

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